Yes, you must report all interest income, even small amounts
The IRS requires you to report every dollar of interest your savings account earns, with no minimum threshold. If your bank paid you $1 in interest, that $1 is taxable income. The only exception is interest that is explicitly exempt by law — such as interest on certain state and municipal bonds — which is rare for ordinary savings accounts.
Your bank will send you a Form 1099-INT if you earned $10 or more in interest during the tax year. If you earned less than $10, your bank may not send the form, but you still owe tax on that interest and must report it yourself. The IRS knows about your interest income because your bank reports it to them on a separate copy of the 1099-INT.
Interest income is taxed as ordinary income at your regular tax rate, which means it is added to your wages, self-employment income, or other earnings and taxed at whatever bracket you fall into for the year.
Key Takeaways
- You must report all interest income on your tax return, regardless of the amount, even if your bank does not send you a Form 1099-INT.
- Your bank reports interest of $10 or more to the IRS on Form 1099-INT, and the IRS cross-checks this against your tax return.
- Interest income is taxed at your ordinary income tax rate, not at a special rate, so it increases your total taxable income for the year.
- If you have multiple savings accounts or banks, you must add up all interest from all accounts and report the total.
- Failing to report interest income can trigger an IRS notice and result in penalties and interest charges on the unpaid tax.
How the IRS knows about your interest income
Banks are required by law to report interest payments to the IRS. When you earn $10 or more in interest during a calendar year, your bank sends Form 1099-INT to both you and the IRS by January 31 of the following year. The IRS uses this information to match against your tax return.
If you report less interest than your bank reported, or if you do not report the interest at all, the IRS will notice the discrepancy. You will receive a notice asking you to explain the difference or pay additional tax. Even if you never receive a 1099-INT from your bank — because you earned less than $10 — the IRS still expects you to report the interest you did earn.
The matching process is automated. The IRS computer system compares the 1099-INT data it receives from banks against the income reported on millions of tax returns. Mismatches trigger notices that are sent months or even years after you file.
Where to report interest income on your tax return
If you file Form 1040 (the standard individual income tax return), you report interest income on Schedule 1, Part I, line 2a. You then transfer the total to line 8 of Form 1040. If you use tax software, the program will ask you for your interest income and place it in the correct location automatically.
If you have a 1099-INT, copy the amount from box 1 of the form (labeled "Interest income"). If you have multiple 1099-INTs from different banks, add them all together and report the total on Schedule 1.
If you earned interest but did not receive a 1099-INT because the amount was under $10, you still enter that interest on Schedule 1. You do not need the form to report the income — you report what you actually earned.
What happens if you do not report interest income
The IRS will eventually notice if your reported income does not match the 1099-INT data your bank submitted. When this happens, you receive a CP2000 notice, which proposes additional tax, penalties, and interest on the unreported amount.
The penalty for failing to report income is typically 20 percent of the underpaid tax, plus interest calculated from the original due date. If the IRS determines the failure was fraudulent rather than accidental, the penalty can be as high as 75 percent. Interest compounds daily, so the longer the debt sits unpaid, the larger it grows.
You have the right to respond to a CP2000 notice within 30 days. If you disagree with the IRS's calculation, you can provide documentation or explanation. If you agree, you can pay the amount proposed or request a payment plan.
Interest from different types of accounts and institutions
All interest-bearing savings accounts are subject to the same reporting rule: savings accounts, money market accounts, certificates of deposit (CDs), and interest-bearing checking accounts all generate taxable interest that must be reported. Credit unions and online banks follow the same rules as traditional banks.
If you have accounts at multiple banks, each bank reports its own interest separately on its own 1099-INT. You must add up all the 1099-INTs you receive and report the combined total on your tax return. The IRS receives copies of all those 1099-INTs, so it knows your total interest income across all your accounts.
Some accounts, such as Roth IRAs and traditional IRAs, do not generate 1099-INT forms because the interest earned inside those accounts is not immediately taxable. The tax is deferred (in a traditional IRA) or never owed (in a Roth IRA). Interest earned in a regular taxable savings account, however, is always taxable in the year it is earned.
When interest is so small it might seem not worth reporting
Even if you earned only $2 or $3 in interest, you are legally required to report it. The IRS has no de minimis rule — no threshold below which income is ignored. This applies equally to a person with $50 in a savings account earning pennies and a person with $500,000 earning hundreds of dollars.
In practice, the IRS is more likely to pursue cases involving larger amounts of unreported income, but that does not mean small amounts are legal to omit. If your bank reports $5 in interest and you do not report it, you are technically violating tax law, even though the actual tax owed might be $1 or $2.
The safest and simplest approach is to report all interest, no matter how small. If you use tax software, entering the amount takes seconds. If you file by hand, adding a few dollars to your income is straightforward.
How to find your interest income if you lost the 1099-INT
If you did not receive a 1099-INT or lost it, contact your bank directly and ask for a copy. Banks are required to provide duplicate 1099-INTs upon request, usually at no charge. You can also log into your online banking account — most banks display year-to-date interest earned in the account summary or statements section.
If you cannot locate the exact amount, your bank statement will show interest deposits month by month. You can add up the deposits yourself to calculate your total interest for the year. Keep a record of this calculation in case the IRS ever asks how you arrived at your reported amount.
If you filed your tax return without reporting interest and later realize you missed it, you can file an amended return using Form 1040-X. It is better to amend voluntarily than to wait for the IRS to send you a notice.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
Yes. Your bank only sends a 1099-INT if you earned $10 or more, but you must report all interest income regardless of the amount. The IRS has no minimum threshold for reporting interest.
What if I have interest from multiple banks?
Add up the interest from all your accounts and report the total on Schedule 1 of your tax return. The IRS receives 1099-INTs from each bank, so it will know if you underreport the combined amount.
Is interest from a savings account taxed differently than other income?
No. Interest is taxed as ordinary income at your regular tax rate. It is added to your other income and taxed in the bracket you fall into for the year. There is no special rate for interest income.
What if the 1099-INT my bank sent me has the wrong amount?
Contact your bank and ask them to issue a corrected 1099-INT (marked as a correction). The bank will send the corrected form to you and the IRS. Report the corrected amount on your tax return.
Can I deduct any expenses related to my savings account?
No. Interest income is reported in full with no deductions. Account fees, if any, are not deductible against interest income. You report the gross interest your bank paid you.